Costs of Becoming an Insurance Agent That Could Swallow You Whole

Being an independent insurance agent can be very rewarding, but it can also be very expensive. An independent insurance agent carries the burden of all expenses acquired through day-to-day business activities. Whether you’re traveling to a client or purchasing new software, these expense can add up quickly and can be overwhelming if not managed correctly. Whether you are an agent or exploring the costs of becoming an insurance agent, it’s important to know which expenses are necessary and which expenses can be avoided in order to avoid a never-ending amount of debt.

In becoming an insurance agent, there are many expenses that come into play. Quite a few of these can be avoided or minimized. Let’s take a look.

Agent Overhead Costs

One fast way to incur a large expense as an independent insurance agent is to assume a large office or retail space is required to conduct business. A large office is not a necessary expense, especially for those who are just starting out. Office and retail spaces come with a large amount of overhead costs such as lease deposit, rent, utilities, phone systems, and so on.

One way to avoid these expenses is to set up an in-home office, requiring minimal upfront cost. You could also use a shared office, rent a space by the hour, or stop by AGA’s training lounge. Furnishing an office space can also add to the overall expense of setting up an office. Instead of buying brand new furniture try searching for previously owned furniture in consignment stores, garage sales, or Craigslist.

Another way to avoid costly start up fees is to use your cell phone as a business line. There are a variety of services and apps available that can add a separate number to your existing cell phone number, making it extremely convenient and cost effective. Some popular services include Skype, Google Voice, and Grasshopper.

Insurance Marketing

Having a strategic marketing plan is crucial for all independent insurance agents. If you don’t have a precise game plan, marketing expenses can get out of hand. When first starting out, it can be tempting to advertise on every social media platform or newspaper available; however, this approach can cause your monthly expenses to skyrocket. Instead, narrow your marketing objectives to what is immediately important to you and your business, and focus on those first. Start with creating free social media profiles and build a presence. Collect email addresses and build a list for future newsletters and email marketing campaigns. Get involved in your community and attend local business events.

If you find yourself lost on where to start with marketing, try utilizing online resources or industry blogs. Partnering with an FMO is also a great choice–most organizations offer tons of resources and materials that will help in developing your marketing strategy

Get 50% of your marketing expenses covered by AGA.

Website, Software, and CRM

In an increasingly digital world, having a custom website for your business is extremely important. To operate efficiently, you’ll also need tools and technology to go along with the site (customer relationship management systems (CRM), email marketing software, quote calculators, and more). The necessary website and software requirements can cost an independent agent tens of thousands of dollars.

This is where partnering with FMO proves beneficial again. An FMO can help you avoid website/software expenses by supplying all the necessary tools for agents to operate effectively and efficiently. Instead of investing thousands of dollars in a website and software systems, you simply pay a certain amount each month to have access to numerous software and tools.

Lead Generation

When agents are first starting out, it’s extremely tempting to purchase leads from various websites promising high quality prospects and guaranteeing sales. Generally, the rule of thumb for these situations is: If it seems too good to be true, it probably is. Instead of being lured into these expensive traps, try to build up your pipeline through social media, referrals, cold calling, and your website. It may initially take time, but the quality and cost of the leads will far outweigh those that have been purchased.

If you don’t have time, or are too impatient to build up your pipeline, an FMO will help. Depending on the type of organization you join, FMOs often provide qualified leads to their members. FMOs are established businesses that are well versed in obtaining qualified leads through different channels.

Taxes

Taxes are inevitable and can be extremely costly if not properly filed and deducted. Fortunately for insurance agents, there are ton of deductions that apply. Being prepared throughout the year is key to the savings you’ll get during tax time. Often times, new insurance agents are unaware of the amount of write offs they can utilize, causing them to pay more in taxes than they should. Common insurance deductions include:

Office supplies

Vehicle expenses

Salary and commissions

Utilities

Business lunches/dinners

Travel expenses

It’s extremely important to make sure you organize and catalog your expense receipts throughout the year. Create a separate drawer in your file cabinet for expense receipts and tax documents, or if you are digital minded, scan your receipts and organize with accounting software. Whichever method you choose, just be sure you are accounting for all expenses you incurred that helped facilitate your business.